JD.com Department of Mathematics和Ant groupAbout to land in the capital market, securities firms reported an uproar and were bullish on the "financial technology" sector. Don't ask if you should buy it, ask if you have a three-game view of the universe-- if you go to the golden track and be a friend of time, long-term ism will win. However, the facts are often at odds with emotions, otherwise there would be no such thing as "seven losses, two draws and one profit".

Just like Jingdong Mathematical Science, outsiders boast about its long-term doctrine, but in fact it is a typical short-term doctrine.

Zhang Lei's new book "value" summarizes the long-term doctrine as "the running water does not compete first, the argument is eloquent", while JD.com 's concept of mathematics is just the opposite, the article will elaborate on this point, the valuation of 200 billion yuan we think is too much water.

01 The essence of JD.com 's mathematics is "selling traffic".

JD.com 's math division, formerly known as JD.com Finance, came from the internal incubation of JD.com (NASDAQ:JD), one of the third-largest e-commerce companies in China, and operated as an independent sector in 2013. Up to 2020, JD.com 's revenue in the first half of the year was 10.33 billion yuan, including 4.28 billion yuan from digital solutions for financial institutions, 5.41 billion yuan from digital solutions for merchants and enterprises, and 580 million yuan from government and other customer digital solutions.

The product line of financial mathematics is very wide.

To put it bluntly, it is called "spreading the cake".

(1) the digital solution of financial institutions, with a revenue of 4.28 billion yuan in the first half of the year."sales flow" is the main source of revenue for this division, such as credit technology (the main product is JD.com gold bars), which promotes a loan of 261.2 billion yuan and revenue of 2.64 billion yuan, which accounts for 60% of the division's revenue.

Other directions of flow takeout have also created credit card technology, insurance technology, fund technology, securities technology and so on. It is really digital oil in exchange for economic benefits.

(2) Digital solutions for merchants and enterprises, with a revenue of 5.41 billion yuan in the first half of the year."washing flow" is the main source of revenue for this division, such as JD.com Bailiao, annual active users are 55.446 million yuan, revenue 1.79 billion yuan, this product accounts for 30% of the division's revenue. Cooperate with receipt business, bill business, prop up the branch of digital solutions for merchants and enterprises.

(3) toG and other customer digital solutions, with revenue of 580 million yuan in the first half.Smart marketing is the main source of revenue for this division, which is equivalent to the small Weimeng Group (marketing revenue of 750 million yuan in the first half of the year). Its media points exceed 15 million, covering 300 cities and more than 600 million people, which should come from trendy media. The secondary business is the smart city solution, which mainly depends on the toB relationship project, which needs to be supported by the whole ecosystem.

To sum up, JD.com 's business includes selling traffic to "loan institutions, credit card institutions, insurance institutions, and financial management institutions"; empowering some pricing, deposit, and risk control products; self-operated consumer credit loan business; receipt and member management business; bill platform business; smart marketing business; smart city business and so on.

Strategy is very unfocused, a bit like a child fight, it is a "son of a bitch", looks mighty, but in fact it is full of loopholes and difficult to defeat the expert. In fact, JD.com math is only able to do some things to sell traffic, washing flow it is not very good.

02 It is not in the same dimension as Ant Group.

When we talk about fintech, we talk about:The use of scientific and technological means to improve the products and services provided by the traditional financial industry, improve efficiency and effectively reduce operating costs.

There are two common business models:

The first level is the realization of traffic, selling the traffic to a third party, or other forms of cleaning and cashing the traffic saved by the main business, so as to eat more than one fish.

The second level is the realization of technology, selling technology to a third party in the same industry, and at a higher level, selling technology to any enterprise that needs to upgrade, which is the Internet industry.

Perhaps the Ant Group under BABA, the flow at the first level has gone very high and far. The listing, which raised $350 and valued at $250 billion (1.7 trillion yuan), is a beautiful myth that makes people think that every listed company in the financial technology sector has a big way to make money.

With endless imagination about JD.com 's mathematics, there is even a very ridiculous argument: BABA GMV (Total transaction volume) 7 trillion, JD.com GMV 2 trillion, so JD.com 's absurd assertion that there are three ant groups with a market capitalization of more than 300 billion yuan is gone.

In fact, JD.com math can give you a new understanding of "financial technology", which is not in the same dimension as the Ant Group:

(1) the profitability of JD.com 's mathematics department.

In the middle of 2020, the revenue was 10.33 billion yuan, the net profit was 390 million yuan, and the net profit margin was 3.7%.

If you compare the Ant Group, you can see how big the gap is. In the same period, the net profit of the Ant Group is 21.56 billion yuan, the net profit margin is 29.7%, and the profit level is about eight times that of JD.com.

(2) the income growth ability of JD.com 's mathematics department.

The question should be seen dialectically. Could JD.com 's low profit margin be caused by the rapid growth rate? After all, there is nothing wrong with the strategy of sacrificing profits in order to seize market share in a critical period.

In the first half of 2020, JD.com 's revenue was 10.33 billion yuan, an increase of 27% over the same period last year. The revenue volume of Ant Group in the same period was 72.53 billion yuan, but the growth rate was 38% faster. The ant mass is 7 times that of JD.com 's revenue, but its income is still 11 pct higher.

Obviously, JD.com 's expansion is of low quality, profits are not made, and revenue can not outrun others.

The average growth in revenue is partly due to:

JD.com has done a good job in selling traffic, corresponding to the rapid growth of revenue from the branch of digital solutions for financial institutions. However, the washing flow is poorly done, and the growth rate of digital solutions for merchants and enterprises is stagnant.

According to a Caijing report, people familiar with the matter said that JD.com Finance's refusal of consumer finance had been directed to a licensed consumer finance company."20% of the good users are also found from it, which shows that the manslaughter rate of C-side risk control is a little high. Therefore, the amount of rejection is as little as possible to the outside, so as not to be hit in the face.

Anyway, in the future, someone will say that the leader of more than 100 billion yuan in revenue can not outrun the little brother. you can beat him and tell him, "never take some of the company's hobbies to challenge the leader's ability to eat."

03 Lack of both Fin and Tech

It may be difficult for JD.com to take the road of pure flow. Is it a different way? is it better to empower science and technology?

In fact, most companies in the financial technology Fintech industry often lack both Fin and Tech.The typical path bottleneck of financial technology of Internet companies: the bottleneck of main business flow (the second half)-the bottleneck of financial flow (sunset field)-the profit bottleneck of empowerment (curtain call).

Really can not be generalized to say that the entire sector ushered in dividends: Ping An Insurance (SH:601318) of OneConnect Financial Technology (NYSE:OCFT), said that the financial endowment can solve the business, now far less than expected financially. 360 DigiTech Inc (NASDAQ:QFIN), owned by SH:601360, which is recognized by investors as one of the last five P2P companies, is half dead.

First, let's take a look at Ping An Insurance's financial account, which can be granted to financial institutions, which seems to be a broad road, but in fact, the financial account of doing so has become a complete loss:

• It lost 1.2 billion yuan in 2018, 1.66 billion yuan in 2019 and 750 million yuan in the first half of 2020.

• Analysts at JP Morgan, Morgan Stanley and Ping an Securities in Hong Kong expect it to lose 1.61 billion yuan in 2020 and 1.26 billion yuan in 2021.

The core of technological empowerment is that financial institutions are inherently conservative, or practitioners with high barriers to entry are conservative, identity (license) can bring sound profits why reform and revolution?

In addition, science and technology enabling can not play an immediate role of change, for example, the comprehensive rate of property insurance companies is about 95%. Does OneConnect Financial Technology include Ping An Insurance's other technology sectors, no matter whether it is anti-fraud or knowledge graph? we do not see that this comprehensive rate has been reduced, and we cannot see an obvious difference compared with our peers.

In the end, the so-called science and technology empowerment has become a "catch-up" thing-"low gross margin + high marketing rates + high management expenses + high R & D expenses (for projects)." It is still reliable to take the budget of the sales department, because the matter of selling traffic is visible and tangible.

The problem facing OneConnect Financial Technology may be the problem of the whole industry:

• Typical companies that earn flow money are 360 DigiTech Inc and JD.com, but they will soon see a bottleneck. 360 DigiTech Inc is in the stage of increasing income but not profit.

• Once the washing flow enters the bottleneck, they will take other ways to empower, do industrial Internet, do cloud technology services, and use technology to transform customers' backstage to standardize management and reduce costs. Eventually they will find the haggard OneConnect Financial Technology standing in the distance.

• A small number of Internet giants do not see bottlenecks in the short and medium term. For example, Ant Group will make money by increasing penetration, and more users will let its technology (the essence of finance is pricing, credit information is a pricing artifact, sesame credit is invincible at the credit level, Tencent's payment score is dregs, even Ma Huateng's battle everywhere is confused) is more perfect, so as to gain an advantage at the "pricing level"-the better the technology, the lower the bad debt rate or cost rate. In this case, the higher the product pricing, the higher the profit margin, and the lower the product pricing, the higher the growth rate.

To put it more simply, risk control is the bottleneck of most financial technology companies. Don't listen to them brag about how complete their data are, how accurate their labels are, and how powerful their algorithms are.

As for JD.com 's math division, according to a Caijing report, people familiar with the matter said: supply chain finance stepped on thunder twice and two leaders left because of the incident. The risk control of 2B finance is not good enough, while the risk control of 2C is very good, but it is too tight. The rejection of consumer finance has been directed to a licensed consumer finance company, "from which 20% of good users have been found, indicating that the manslaughter rate of C-side risk control is a bit high."

04 A "short-term" company

There is a passage in Zhang Lei's new book value: at a time when society, economy, science and technology, and humanities are developing rapidly, we should be especially vigilant against opportunism and tuyerism. Long-term doctrine is not only a kind of methodology, but also a kind of value.

Short-term doctrine, on the contrary, is about rapid income expansion. And what about continuity? It often doesn't stand up to scrutiny. JD.com 's short-term doctrine of mathematics is shown in the following places:

(1) Finance is the result.As we have talked before, JD.com 's revenue volume is only that of the Ant Group 1Universe 7, but neither in terms of revenue growth nor profit margins can catch up with the latter.

(2) the lack of strength in business and middle-and high-level manpower is one of the reasons.According to media reports, JD.com has a middle and high-level turnover group of 500. except for the consumer money business, almost all of JD.com 's other business lines changed from 2018 to 2019, involving supply chain finance, corporate finance and rural finance, insurance and wealth management, Jingka, owner Financial Services, ZRobot, Dinglian Puhui and so on. Many businesses rise and fall with the coming and going of personnel.

(3) the benefit sharing and decision-making mechanism at the top level is not perfect.Liu Qiangdong holds 50.35% of the shares directly and indirectly, and has absolute control over JD.com 's mathematics. CEO Chen Shengqiang holds 4.23% of the shares and plays the role of a professional manager. According to relevant sources, "many things within the company need to be decided by Liu Qiangdong." The power structure is the same as that of JD.com.

For Liu Qiangdong, a major shareholder, it is a stimulus to run a company like JD.com, which goes public in a few years, has a lot of wealth, and makes a lot of money with his brothers. For investors, if you believe its inflated pre-IPO valuation of 200 billion yuan and buy in the stock market, there may be an accident.

Many people like the relative valuation of the leading companies, especially the relative valuation of the leading companies, which is a very stupid way of valuation, which is the same level as that of the leading companies.

First of all, many companies can be seen on JD.com 's product line, such as 360 DigiTech Inc, Finance Yitong, Ant Group, Lakala, Weimeng Group, and even Haikang Weiwei. Second, the revenue growth rate, gross profit level, net profit level, cash flow level, business moat and organizational level of the two companies you choose are completely different. Is it not intentional to give someone away when you compare the relative valuation?

Valuation is always guided by growth and profitability (the ability to access cash flow), from a medium-term point of view:

Assuming that JD.com can maintain the current growth rate of 27% in the next three years, the revenue will reach 40 billion yuan. The profit margin is 3.7 per cent and the net profit is 1.48 billion. If you give 30 times PE, then the market capitalization is about 44 billion, with a valuation of 200 billion? This is definitely a joke. If the market capitalization is really so high and investors are still flocking to it, it will be a pure gift.

In a short-term company, the major shareholders win the present and the minority shareholders lose the future.